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Local Marina Mounts Challenge in Tax Dispute with County on Constitutional Grounds

June 25, 2013

by:

Dwayne Page

The owners of Cookeville Boat Dock & Resort Inc. haven't paid their ad valorem taxes to the county since 1998 and their attorney claims it's unconstitutional for them to be forced to pay.

Jon E. Jones of Cookeville, last Monday, June 17 filed an amended answer to the county's Chancery Court lawsuits against delinquent taxpayers including Cookeville Boat Dock & Resort along with a counter complaint seeking a declaratory judgment for his clients.

Jones contends the owners of Cookeville Boat Dock & Resort are being discriminated against in that the county is trying to force them to pay ad valorem taxes on the boat dock facility which is leased from the U.S. Army Corps of Engineers (federal government property) while other properties in Tennessee leased from the state or local government entities (under Article II, Section 28 of the Tennessee Constitution) are exempt from payment of ad valorem taxes. This, he claims is a violation of the Supremacy Clause of the U.S. Constitution making the tax assessment against Cookeville Boat Dock & Resort, Inc. invalid.

County officials have said that Cookeville Boat Dock & Resort, Inc., like other marinas on the lake, conducts business on leased land from the U.S. Army Corps of Engineers and is assessed by the county only for personal property and improvements.

From 1998 through the 2011 tax year, owners of Cookeville Boat Dock & Resort, Inc. have been named as defendants in DeKalb County Chancery Court lawsuits filed against delinquent taxpayers. The amount Cookeville Boat Dock & Resort, Inc. owes through 2011 in delinquent taxes comes to $152,303.36 (taxes on personal property and leased property including the base tax plus interest and penalty, attorneys fees, and court costs). Further penalties are assessed each month. Additionally for the 2012 tax year, the Trustee's Office reports that Cookeville Boat Dock & Resort Inc. owes a total of $8,048 in delinquent taxes including interest and penalty through June 30th, 2013.

Typically, if someone has an issue about their taxes, they must first pay them and then file a protest or challenge. According to county officials, Cookeville Boat Dock & Resort, Inc. has gone without paying all their taxes for up to fifteen years.

Each year the attorney for Cookeville Boat Dock & Resort, Inc. has filed an answer to the delinquent tax lawsuits, claiming that the county can't "collect a tax on real estate" on federal property since the U.S. government pays in lieu of taxes to the state for the use and benefit of DeKalb County. That constitutes, in essence, double taxation, according to the answer.

Cookeville Boat Dock & Resort, Inc. denies it owes any ad valorem taxes to DeKalb County and that the real property assessed is held in fee by the United States (federal government) and is leased to the marina pursuant to "lease for commercial concession purposes".

In the counter claim and request for declaratory judgment, Jones states that "DeKalb County asserts that this property is subject to ad valorem taxation. The claim of DeKalb County is based on Article II, Section 28 of the Constitution of Tennessee, which on its face allows for exemption of property leased by the State but not by the United States."

In their Trial Brief, "Cookeville Boat Dock & Resort, Inc. asks the Court to declare that DeKalb County's assessment of ad valorem taxes against boat dock facilities leased by Cookeville Boat Dock & Resort, Inc from the United States is a violation of the Supremacy Clause of the U.S. Constitution because Tennessee exempts boat dock facilities from taxation when the lessor is an agency of the state."

"Pursuant to Article II, Section 28, Tennessee discriminates against a lessee of the United States and in favor of lessees of the State of Tennessee, its counties, or its municipalities or other local governmental entities. The constitutional provision and resulting discrimination against lessees of the United States including the counter plaintiff (Cookeville Boat Dock & Resort,Inc.), violate the Supremacy Clause of the United States," according to the counter claim and request for declaratory judgment.

Concerning compensation to DeKalb County for lost Ad Valorem revenue, the trial brief states that "In 1940, Congress recognized that the taking of lands for flood control purposes would reduce the local property tax base. Congress also recognized that some of the property acquired would be developed and used for recreational purposes through concessions/leases. Congress decided that the United States should pay 75% of all monies received by the United States from leasing of lands acquired for flood control purposes to the State in which such property is situated...for the benefit of public schools and public roads of the county or counties, in which such property is situated, or for defraying any of the expenses of county government. Seventy five percent of Cookeville Boat Dock & Resort, Inc.'s annual payment substantially exceeds the taxes assessed," according to the trial brief.

The counter claim of Cookeville Boat Dock and Resort states "Unless this court declares that Article II, Section 28 of the Constitution of Tennessee, and the resulting discrimination against the counter plaintiff (Cookeville Boat Dock & Resort, Inc.) as a lessor from the United States are violations of the Supremacy Clause of the Constitution of the United States, counter defendant (DeKalb County) will continue to illegally assess ad valorem taxes against property leased to Cookeville Boat Dock & Resort, Inc. and this will encumber and confuse counter plaintiff's (Cookeville Boat Dock & Resort, Inc.) use of said property".

"Wherefore, counter plaintiff (Cookeville Boat Dock & Resort, Inc.) asks the court to declare that Article II, Section 28 of the Constitution of Tennessee is invalid and that the real property subject to the counter plaintiff's lease for commercial concession purposes is exempt from ad valorem taxation. The counter plaintiff asks that the Attorney General of the State of Tennessee be made a party to this litigation for purposes of defending the constitutionality of Article II, Section 28 of the Constitution of Tennessee".

Former Chancellor Vernon Neal recused himself from hearing the delinquent tax case against Cookeville Boat Dock & Resort, Inc. in 2002 citing a personal conflict. Former Circuit Court Judge John Turnbull was designated and appointed to hear the case to its conclusion. After Turnbull retired from the bench, the case was passed on to Judge Amy Hollars but it still has not been settled in court.

Last December, the county commission approved a motion by second district member Jack Barton to "give this priority number one in our unpaid taxes that our (tax) attorney is going after," he said.

The case was to be on the Chancery Court docket last Thursday, June 20 but it was delayed apparently due to the Tuesday filing of Cookeville Boat Dock's amended answer and counter complaint for declaratory judgment. No new court date has yet been set in the case.